Commenting on the 2015 personal insolvency statistics published today, Adrian Hyde, vice-president of UK insolvency trade body R3, says:
“The gap in insolvencies between men and women has grown again. While insolvency numbers are falling, they are continuing to fall faster for men than women.”
“The insolvency statistics reflect the fact that there is, unfortunately, still a large degree of gender inequality in the economy. Women may be more prone to insolvency, but this is probably linked to the fact that they tend to have lower levels of assets or incomes to live on than men. They are also much more likely to be financially dependent on someone else. It’s a lot easier to ‘over-spend’ or be exposed to a financial shock in this situation.”
“When it comes to consumer debts, both men and women seem to have a similar level of difficulty. This is reflected by the Individual Voluntary Arrangement numbers, which are very similar for both men and women. The big differences come with bankruptcies, which men are more likely to enter, and Debt Relief Orders, which women are more likely to enter.”
“DROs are much more common than bankruptcies. Those entering a DRO have low levels of debts, but they also have very low assets and little or no incomes. Women are less likely to be in work, or more likely to be in part-time employment than men. They tend to have lower wages, too.”
“The introduction of DROs in 2009 helped play a part in women ‘catching up’ to men in terms of insolvency: before that many women would have struggled to access an insolvency procedure appropriate to their situation. Access to DROs was widened in late 2015.”
“Bankruptcies are associated with job losses and business failures, which are much less common when the economy isn’t struggling. Bankruptcy numbers have really fallen recently. It’s worth noting that women are much more likely than men to become bankrupt because of a relationship breakdown or their partner losing their job. With rising numbers of female entrepreneurs and rising employment among women this should change, albeit slowly.”
What causes insolvency among men and women?
R3 published a report in June 2016 on the different causes of men’s and women’s insolvencies. The report can be found here and a summary is here.
The report includes statistics on the 17 different causes of bankruptcies in 2014, as categorised by the Insolvency Service, broken down by gender. The report shows:
- Business failure-related bankruptcies accounted for roughly one-in-three men’s bankruptcies in 2014, but only one-in-seven women’s bankruptcies.
- he top cause of bankruptcy for men – the loss of employment – was only the 6th most common cause of bankruptcy for women.
- Relationship breakdown was the number one cause of women’s bankruptcies in 2014 but it was only the 8th most common cause of bankruptcies among men.
- The top three causes of women’s bankruptcies (relationship breakdown, living beyond means, and reduction in household income) were the only factors that affected more women than men.
“As in previous years, personal insolvencies are concentrated in the North East and the South West, with a handful of acutely affected towns on the coast. These are areas associated with lower wages and higher unemployment. And where there is employment, it is more likely than elsewhere to be part-time or seasonal work. Over half of the top-10 places with the highest insolvency rates in 2015 were on the coast.”
“These areas show the cost of failing to diversify a local economy. Either local personal finances suffer – sometimes for years afterwards – if a major employer or industry declines rapidly or they suffer because the dominant local sector does not provide enough job security or income.”
Different types of insolvency
Bankruptcy: During a bankruptcy your assets are placed under the control of a trustee who will use them to raise money to repay creditors. You are bankrupt for a year (during which you are subject to some restrictions, such as not being able to be director of a company), although your assets may stay under the trustee’s control after that. A creditor may petition the court to have you made bankrupt if you owe them at least £5,000, or you can apply to be made bankrupt yourself (which costs £655 in up-front government and court fees for online applications). With some exceptions, your debts are ‘cancelled’ at the end of the process.
Individual Voluntary Arrangements: A statutory agreement between you and your creditors to repay a certain portion of your debts over a certain period of time. You retain control of your assets and the agreement is overseen by an independent supervisor. You have to have some surplus income left over after your living costs every month from which to make payments.
Debt Relief Orders: You may enter a DRO if you have under £1,000 of assets and under £20,000 of debts. Your assets are not used to repay creditors and your debts are ‘cancelled’ at the end of the process. Like bankruptcy, you subject to some restrictions for a 12 month period.